Opening. Today s agenda. 1. Introduction. 2. Stakeholders visions and impact on tariffs. 3. In-depth explanation of NC TAR. 4.

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2 Opening 1. Introduction 2. Stakeholders visions and impact on tariffs Today s agenda 3. In-depth explanation of NC TAR 4. Next steps

3 1. Introduction 2. Stakeholders visions and impact on tariffs Today s agenda 3. In-depth explanation of NC TAR 4. Next steps

4 1. Introduction 2. Stakeholders visions and impact on tariffs Today s agenda 3. In-depth explanation of NC TAR 4. Next steps

5 NC TAR in depth Transmission services, non transmission services Price methodologies, cost allocation assessment Price adjustments Publication requirements Consultation requirements

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7 Non-transmission service The non-transmission services revenue shall be recovered by nontransmission tariffs applicable for a given non- transmission service. Such tariffs shall be as follows: cost-reflective, non-discriminatory, objective and transparent; charged to the beneficiaries of a given non-transmission service with the aim of minimising cross-subsidisation between network users within or outside a Member State, or both. Where according to the national regulatory authority a given nontransmission service benefits all network users, the costs for such service shall be recovered from all network users. Ref. Article 4.4

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14 RPM for capacity based transmission services (1/2) The application of the RPM shall provide a reference price at all entry and exit points in a given entry-exit system (Ref. article 6). It aims at (Ref. article 7): enabling network users to reproduce the calculation of reference prices and their accurate forecast; taking into account the actual costs incurred for the provision of transmission services considering the level of complexity of the transmission network; ensuring non-discrimination and prevent undue cross-subsidisation including by taking into account the cost allocation assessments; ensuring that significant volume risk related particularly to transports across an entry-exit system is not assigned to final customers within that entry-exit system; ensuring that the resulting reference prices do not distort cross-border trade.

15 RPM for capacity based transmission services (2/2) Each RPM can be chosen as long as it is compliant with article 7. Where the proposed RPM is other than the CWD from article 8, its comparison against the latter accompanied by the indicative reference prices (Ref. article 26.1). The capacity weighted distance (CWD) methodology is fully described in NC TAR (ref. article 8)

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17 Cost Allocation Assessment (1/5) The cost allocation assessment (CAA, ref. article 5) shall indicate the degree of cross-subsidization between intra-system network use and cross- system network use based on the proposed RPM Intra-system network use (Ref. article 3.8) means transporting gas within an entry-exit system to customers connected to that same entry-exit system ( domestic use ) Cross-system network use (Ref. article 3.9) means transporting gas within an entry-exit system to customers connected to another entry-exit system ( transit use ) Two assessments: a cost allocation assessment relating to the transmission services revenue to be recovered by capacity-based transmission tariffs (ref. article 5.3) a cost allocation assessment relating to the transmission services revenue to be recovered by commodity-based transmission tariffs (ref. article 5.4) Where the results of the CAA exceed 10 % (ref. article 5.6), the national regulatory authority shall provide the justification for such results in the decision referred to in Article 27(4).

18 Cost Allocation Assessment (2/5) Revenue intra and Revenue cross have to be determined according to ref. article 5.3 for capacity based network use and ref. article 5.4 for commodity based network use Revenue intra is the sum of the revenue for intra-system network use at entry points and the revenue for intra-system network use at exit points Revenue cross is the sum of the revenue for cross-system network use at entry points and the revenue for cross-system network use at exit points

19 Cost Allocation Assessment (3/5) For each exit point it is clear that it serves either 100% intra-system network use or 100% cross-system network use Revenue for intra-system network use for exit points can be determined unambiguously: sum of revenue from capacity of intrasystem exit points Revenue for cross-system network use for exit points can be determined unambiguously: sum of revenue from capacity of crosssystem exit points

20 Cost Allocation Assessment (4/5) For entry points it is not clear which part of the entry capacity will be used for intra-system network use and which part will be used for cross-system network use Ref. article 5.5a: cross-system entry network use (CSN) is deemed to be equal to cross-system exit network use, as a consequence each entry point has both cross-system network use and intra-system network use Revenue for cross-system entry network use can be calculated pro rata: CSN/TN * total entry revenue, where TN is total entry network use (ref. article 5.5b) Revenue for intra-system entry network use is difference between total entry revenue and revenue for cross-system entry network use (ref. article 5.5c)

21 Cost Allocation Assessment (5/5) Driver intra and Driver cross have to be determined according to ref. article 5.3 for capacity based network use and ref. article 5.4 for commodity based network use Determining intra-system and cross-system cost drivers can be calculated according to the steps on previous slides (mutatis mutandis) Although this is a logical approach, it is an interpretation, because there are no explicit guidelines and/or formulas in the NC TAR to determine the CAA cost drivers

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23 Price Adjustments (1/2) Allowed price adjustments to the application of the RPM (ref. article 6.4, article 9) 1. Storage discount A discount of at least 50 % shall be applied to capacity-based transmission tariffs at entry points from and exit points to storage facilities, unless and to the extent a storage facility which is connected to more than one transmission or distribution network is used to compete with an interconnection point. 2. For the purpose of increasing security of supply Discount on LNG entry Entry/exit points ending isolation of member states 3. Benchmarking whereby reference prices at a given entry or exit point are adjusted so that the resulting values meet the competitive level of reference prices; 4. Equalisation whereby the same reference price is applied to some or all points within a homogeneous group of points; 5. Rescaling whereby the reference prices at all entry or all exit points, or both, are adjusted either by multiplying their values by a constant or by adding to or subtracting from their values a constant.

24 Price Adjustments (2/2) Each price discount adjustment leads to a under-recovery of revenues which must be recovered. This may be done in the following ways: 1. Rescaling (ref. article 6.4c) whereby the reference prices at all entry or all exit points, or both, are adjusted either by multiplying their values by a constant or by adding to or subtracting from their values a constant. 2. Complementary revenue recovery charge (ref. article 4.3b) levied for the purpose of managing revenue under- and over-recovery; calculated on the basis of forecasted or historical capacity allocations and flows, or both; applied at points other than interconnection points; applied after the national regulatory authority has made an assessment of its cost-reflectivity and its impact on cross-subsidisation between interconnection points and points other than interconnection points.

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31 1. Introduction 2. Stakeholders visions and impact on tariffs Today s agenda 3. In-depth explanation of NC TAR 4. Next steps

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33 Topics for stakeholder session on 9 June 2017 Scope of NC TAR; TS/NTS Possible RPM s Agenda Possible adjustments, CAA Tariff year

34 Topics for stakeholder session on 28 June 2017 Possible multipliers/seasonal factors Interruptible capacity Agenda Possible tariff methods for NTS Requirements for publication and consultation